What Happens to a Joint Bank Account When One Person Dies?

A joint bank account is a financial arrangement where two or more individuals share ownership and access to the same account. This setup allows all account holders to manage transactions, simplifying shared financial responsibilities. While convenient for everyday money management, the implications of a joint account change significantly upon the death of one of the account holders.

Types of Joint Bank Accounts and Their Implications

Joint bank accounts are primarily distinguished by how assets are handled upon the death of an account holder, with the most common types being Joint Tenancy with Right of Survivorship and Tenancy in Common. These structures determine whether the deceased’s share automatically transfers to the survivor or becomes part of their estate.

Joint Tenancy with Right of Survivorship (JTWROS) is a common arrangement, particularly among spouses or close family members. In this setup, when one account holder dies, their ownership interest in the account automatically transfers to the surviving account holder(s) by operation of law. This means the funds bypass the probate process, allowing the survivor to typically retain full access to the account without court intervention. The deceased’s will generally does not control the distribution of these specific funds.

Conversely, a Tenancy in Common (TIC) account structure means each account holder owns a distinct, undivided share of the account. Upon the death of one account holder, their share does not automatically transfer to the surviving co-owner(s). Instead, the deceased’s portion becomes part of their estate, subject to the terms of their will or state intestacy laws if no will exists. This typically necessitates a probate process for the deceased’s share, meaning the funds may be temporarily inaccessible to the surviving account holder until the estate is settled.

Some accounts might also include Payable on Death (POD) or Transfer on Death (TOD) designations. These designations specify a beneficiary who inherits the account funds directly upon the death of the last account owner, also bypassing probate.

Immediate Actions for the Surviving Account Holder

Upon the death of a joint account co-owner, the surviving account holder should promptly notify the financial institution. This notification is a necessary step for the bank to update its records and guide the survivor through the process of accessing or retitling the account.

To facilitate the process, the bank will typically require specific documentation. A certified copy of the deceased’s death certificate is almost always necessary to confirm the death and initiate the change of ownership. The surviving account holder will also need to provide their own identification, such as a valid state-issued ID or passport. In some instances, especially if the account balance is substantial or if there are complexities, additional legal documents may be requested by the bank.

For JTWROS accounts, the transition is usually seamless; the surviving owner generally retains full access, though the bank may temporarily freeze the account to verify documentation and process the change. The account effectively becomes the sole property of the survivor. In contrast, for TIC accounts, the deceased’s share may be frozen or require a probate court order before the funds can be fully accessed or distributed, potentially leading to delays.

Estate and Tax Considerations

Joint bank accounts, particularly those with rights of survivorship, offer a mechanism to transfer assets outside of the formal probate process. This can streamline the transfer of funds upon death, potentially saving time and legal expenses associated with probate administration.

Despite bypassing probate, the value of a joint account may still be included in the deceased’s gross estate for federal and, if applicable, state estate tax purposes. Federal estate tax generally applies only to very large estates, exceeding a certain threshold ($13.61 million per individual in 2024). However, state-level estate or inheritance taxes can have different thresholds and may apply to joint account funds, especially if the deceased contributed most or all of the funds. The portion included in the taxable estate often depends on the deceased’s contribution to the account, with specific rules for spouses often differing from those for non-spouses.

While JTWROS accounts typically protect funds from general creditor claims against the deceased’s estate because they pass outside of probate, this protection is not absolute. Creditors may still be able to make claims against the joint account funds if the debt was incurred jointly by both account holders or if the deceased’s probate estate has insufficient assets to cover their debts. Specific state laws and the circumstances surrounding the debt or account funding determine the extent to which creditors can access these funds.